Whitehaven Quarterly Report Summary

Whitehaven released its Mar’2014 quarterly result this week. After a very strong first half 2013/14 production result, the last quarter was well below forecast. Key details:

• The key variance was on the coal production target. Total production for 2013/14 is now guided to 9.9Mt (100% basis), 11% below the 11.0Mt target management set back in Sept’2013. Narrabri was disrupted by equipment relocation, and Tarrawonga and Rocglen both went backwards.
• The second key variance is the very weak coal price. Whitehaven expects a fall in metallurgical coal prices in the June quarter to about $US93/t, down 8% from the Mar’2014 quarter. Thermal prices hit US$73/t at the end of Apr’2014, down 6% on the Mar’2014 quarter average.
• Most commodity analysts have a recovery back above US$80/t as their base case for 2014 and 2015 – so expect another round of forecast downgrades to emerge if the coal price remains at current levels. Whitehaven acknowledged weak seaborne coal demand out of China was a key negative.
• Even though Whitehaven management keeps talking about coking coal, its Mar’2014 quarter production was 83% thermal coal, the lower margin product.
• Whitehaven is now forecast to report a net loss of A$30-50m in 2013/14. The market had assumed at the start of this financial year that the company would bounce back to profit this year, but this has been pushed back a year to 2014/15. A high A$, low thermal coal price and /or further delays at Maules Creek would push that out further.
• The result release details the Maules Creek project ramp-up timetable, purporting to all be on-time and on-budget. However, management now target initial run-of-mine production of 6Mtpa, and then “over a period of three years to ramp up to 13.0Mtpa ROM coal as additional equipment is sourced for the mine and markets are developed for the coal.” This is very different to the 11-13Mt forecast for 2015/16 by the CEO in Aug’2013.
• The WHC stock price is down 25% year-on-year (yoy) in an overall market that is up 6% yoy.

The full report is available at:

http://member.afraccess.com/media?id=CMN://2A794526&filename=20140429/WHC_01512245.pdf